List of Figures ................................................ xi
List of Tables ................................................. xv
List of Appendices ........................................... xvii
List of Variables ............................................. xix
List of Abbreviations ....................................... xxiii
Acknowledgments ............................................... xxv
1 Introduction ............................................... 1
1.1 The Public Debate versus the Economics Profession .......... 1
1.1.1 "Ricardo Is Still Right..." ......................... 1
1.1.2 Perceived and Actual Effects of Globalization ....... 5
1.1.3 The "Kletzer Effect" ................................ 7
1.2 A Global Value Chain Approach to Offshoring ............... 10
1.2.1 Globalization and the Economic Crisis of
2008-2009 .......................................... 11
1.2.2 The Governance of Value Chains ..................... 16
1.2.3 Re-Embedding the Market ............................ 24
1.2.4 An Interdisciplinary Account of Offshoring ......... 29
2 The New Wave of Globalization ............................. 33
2.1 Measures of Offshoring .................................... 37
2.1.1 The Changing Nature of Trade in Intermediates ...... 37
2.1.2 Trade and Broader Measures of Offshoring ........... 42
2.1.3 U.S. Aggregate Offshoring Intensities .............. 44
2.1.4 U.S. Sectoral Offshoring Intensities ............... 47
2.2 Drivers of the New Wave of Globalization .................. 48
2.3 Trade Crisis and Recovery ................................. 54
3 What Role for Comparative Advantage? ...................... 59
3.1 Introduction .............................................. 59
3.2 The Fall and Revival of Comparative Advantage ............. 62
3.2.1 The Fall of Comparative Advantage .................. 63
3.2.2 The New International Economics Backlash ........... 64
3.2.3 The Revival of Comparative Advantage ............... 68
3.2.4 Models of Offshoring in a Comparative Advantage
Framework .......................................... 71
3.3 Limits of Comparative Advantage ........................... 79
3.3.1 Conceptual Limits .................................. 80
3.3.2 Historical Limits .................................. 94
3.3.3 Ethical Limits ..................................... 98
3.4 Conclusion ............................................... 100
4 Lead Firm Strategy and Global Value Chain Structure ...... 103
4.1 Trade, Profits, and Investment ........................... 104
4.1.1 Cost Markups, the Profit Share, and Offshoring .... 105
4.1.2 The Persistence of Oligopoly ...................... 111
4.1.3 Global Value Chains and Heightened Competition
among Suppliers ................................... 116
4.2 Endogenous Asymmetry of Market Structure in Global
Value Chains ............................................. 123
4.2.1 Power and the Distribution of Valued Added ........ 123
4.2.2 Sustainability of the Asymmetry ................... 128
4.2.3 What Drives Foreign Direct Investment? ............ 130
4.3 Determinants of Global Value Chain Structure ............. 135
4.3.1 Transactions Cost-Based Theories .................. 135
4.3.2 Resource-Based Theories and the Shift to Core
Competence ........................................ 139
4.3.3 Beyond Transactions Cost Minimization: Global
Value Chain Governance Strategies ................. 142
4.4 A Classical Approach to Offshoring ....................... 148
4.4.1 Relevance of Ricardo's Dynamic Gains from Trade ... 148
4.4.2 Static and Dynamic Gains from Offshoring .......... 152
4.4.3 Conclusion ........................................ 155
5 Economic Insecurity in the New Wave of Globalization ..... 157
5.1 Economic Insecurity ...................................... 158
5.2 Varieties of Capitalism and the Burden of Economic Risk .. 163
5.2.1 Strictness of Employment Legislation versus Labor
Support ........................................... 163
5.2.2 The Burden of Economic Risk ....................... 166
5.3 Connections between Globalization and Economic
Insecurity ............................................... 168
5.3.1 Skill-Biased Shifts of Labor Demand ............... 170
5.3.2 Overall Labor Demand .............................. 174
5.3.3 Labor Share of Income ............................. 176
5.3.4 Displacement from Trade ........................... 177
5.3.5 Elasticity of Labor Demand and the Threat Effect .. 177
5.4 Offshoring and the Labor Market: Econometric Evidence .... 180
5.4.1 Offshoring and Labor Demand in the United States .. 180
5.4.2 Offshoring and the Labor Share in the United
States ............................................ 186
5.4.3 Offshoring and the Labor Share: The Role of
Labor Market Support .............................. 190
5.4.4 Actual and Perceived Effects of Offshoring ........ 204
6 Financialization and the Dynamics of Offshoring .......... 210
6.1 The Shift to Core Competence, Offshoring, and
Financialization ......................................... 212
6.1.1 Decline in Investment ............................. 213
6.1.2 Increase in Financialization ...................... 214
6.2 Offshoring, Capital Accumulation, and Financialization:
Econometric Evidence ..................................... 223
6.2.1 Offshoring and Capital Accumulation in the
United States ..................................... 223
6.2.2 Offshoring and Financialization in the United
States ............................................ 228
6.3 Sustainability and Replicability of the Globalization-
Financialization Link .................................... 231
6.3.1 Sustainability .................................... 231
6.3.2 Replicability ..................................... 233
6.4 Conclusion: Interdependence of Globalization and Finance
in the Global Crisis ..................................... 234
7 Economic Development as Industrial Upgrading in Global
Value Chains ............................................. 238
7.1 Vertically-Specialized Industrialization ................. 239
7.1.1 From Import Substitution to Export Orientation
to Vertical Specialization ........................ 239
7.1.2 Entering Global Value Chains through Export
Processing Zones .................................. 242
7.2 Economic Upgrading versus Social Upgrading ............... 248
7.2.1 Upgrading Defined and Measured ..................... 248
7.2.2 Economic and Social Upgrading at the National
Level ............................................. 253
7.2.3 Economic and Social Upgrading in Global Value
Chains ............................................ 260
7.3 Gender Bias in Industrial Upgrading ...................... 273
7.4 Obstacles to Upgrading: Prebisch-Singer Trap for the
Twenty-First Century? .................................... 278
8 Outsourcing Economics .................................... 284
8.1 Global Business and the Polanyian Moment ................. 284
8.2 Trade and Exchange Rate Politics ......................... 287
8.3 Profits and the Macroeconomic Imbalances ................. 291
8.4 Capturing the Gains from Globalization ................... 295
8.4.1 Maximizing Dynamic Gains and Reducing
Financialization ......................................... 296
8.4.2 Reducing the Cost of Job Loss and Promoting
Innovation ........................................ 300
8.4.3 Reducing Asymmetries and Increasing
Accountability for Social Standards in Global
Value Chains ...................................... 303
8.4.4 Industrial Policy in the Era of Vertically-
Specialized Industrialization ..................... 306
8.4.5 Alternative Sources of Demand ..................... 310
8.5 Capitalism's Explanation System .......................... 313
References ............................................... 317
Index ......................................................... 345
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